Yield Farming has recently been the focus of interest and discussion in the broader crypto community, initiating a new era for DeFi via liquidity mining.
The popular formulas of current liquidity mining are:
Daily output per user = daily output of the mining pool * staked amount/total staked amount
Under this model, the whales🐳 become the top winners, they can easily take away nearly all liquidity rewards and irrational sellout their yield. And this is a harsh predatory game for shrimps🦐. With the rise of yield farming, whales are the most common concern for DeFi farmers.
To solve this problem and toward a more sustainable ecosystem of DeFi, we create the 👉Liquidity mining with algorithmic adjusted.
In DEGO, we used a set of deterministic algorithms for liquidity mining, convert the LP token staked by users into POWER(similar to the hashrate of Bitcoin mining), and getting earnings through them. Under this model:
Daily output per user = daily output of the mining pool * POWER / total POWER
POWER = staked LP token amount * coefficient of correspondence
📝The calculation formula of POWER are:
1/ We divide users into three ranges according to their staked amount:
a) Worst range: users with the most staked amount
b) Best range: users with the intermediate staked amount
c) Common range: users with the smallest staked amount
- For example, User A staked 10 LP Tokens and is currently in the common range, then his POWER is 10 * 3 = 30 POWER
The numbers of the initial three ranges are, [10, 10, total number-20]
As the total number of users increases by 100 people, the worst range and the best range increase by 10 slots, up to a maximum of 50 people.
*If the user staked less than three days, 10% of the earnings are deducted during withdrawal and transfer to the dividend pool.
With DEGO Protocol, we’re able to achieve a more decentralized and sustainable ecosystem of liquidity mining.